Abstract

http://ssrn.com/abstract=2326414
 


 



Media-Driven High Frequency Trading: Evidence from News Analytics


Bastian Von Beschwitz


Board of Governors of the Federal Reserve System (FRB)

Donald B. Keim


University of Pennsylvania - Wharton School

Massimo Massa


INSEAD - Finance

October 2, 2013


Abstract:     
We investigate whether providers of high frequency media analytics affect the stock market. This question is difficult to answer as the response to news analytics usually cannot be distinguished from the reaction to the news itself. We exploit a unique experiment based on differences in news event classifications between different product releases of a major provider of news analytics for algorithmic traders. Comparing the market reaction to similar news items depending on whether the news has been released to customers or not, we are able to determine the causal effect of news analytics on stock prices, irrespective of the informational content of the news. We show that coverage in news analytics speeds up the market reaction by both increasing the stock price update and the trading volume in the first few seconds after the news event. Such coverage also increases prices if the content of the news is positive. Placebo tests and econometric robustness checks, either based on difference-in-difference specifications or different samples, confirm the results. The fact that a provider of media analytics impacts the market in a separate and distinct way from the underlying information content of the news has important normative implications for the regulatory debate.

Number of Pages in PDF File: 46

Keywords: High Frequency Trading, News Wires, Textual Analysis, Market Reaction

JEL Classification: G10, G12, G14

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Date posted: September 17, 2013 ; Last revised: November 4, 2013

Suggested Citation

von Beschwitz, Bastian and Keim, Donald B. and Massa, Massimo, Media-Driven High Frequency Trading: Evidence from News Analytics (October 2, 2013). Available at SSRN: http://ssrn.com/abstract=2326414 or http://dx.doi.org/10.2139/ssrn.2326414

Contact Information

Bastian Von Beschwitz (Contact Author)
Board of Governors of the Federal Reserve System (FRB) ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
Donald B. Keim
University of Pennsylvania - Wharton School ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-7685 (Phone)
215-898-6200 (Fax)

Massimo Massa
INSEAD - Finance ( email )
Boulevard de Constance
F-77305 Fontainebleau Cedex
France
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)
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